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The Lunch

Rachel Idzerda for The Globe and Mail

Mervyn King, the former BoE governor, on leaving the world's oldest central bank, monetary policy and the worthlessness of economic forecasts

I would never have pegged former Bank of England governor Mervyn King as a warm-and-fuzzy romantic.

During his long tenure, he displayed little patience with those who didn't share his views or lacked his grasp of economic history. He set off financial tremors with his tart-tongued assault on big-bonus bankers behaving badly. And you can cut the gloom with a knife when he talks about how vulnerable the world is to another major economic crisis.

But then Baron King of Lothbury (the lofty title and a seat in the House of Lords came on his retirement) tells me the touching story of how he came to marry for the first time in 2007. It happened at the age of 59, nearly four decades after he first fell in love with the same woman, Barbara Melander, when they were students at Cambridge University.

The two had lost contact after she returned to her native Finland, until he received a surprise phone call from her 25 years later. "We met up at Frankfurt airport. When I saw her, I felt exactly the same as I had done all that time before," he says of the rekindled romance with the newly divorced Ms. Melander, who had gone on to become a noted furniture designer.

It's just one of the intriguing personal details the normally reserved economist has been happy to share since leaving the world's oldest central bank in 2013 after 22 years, the last 10 of them at the helm. During a lengthy lunch, the talk veers from monetary policy, the worthlessness of economic forecasts and the rise of populist politicians in Europe and the U.S. to his new rural life, his wine cellar, sports – he's a huge cricket and soccer fan – and how everybody needs a good, inexpensive "Friday night restaurant."

Lord King, then governor of the Bank of England, in 2012.

Lord King, then governor of the Bank of England, in 2012.

Simon Dawson/Bloomberg

We are meeting because he has a new book out, The End of Alchemy, his lucid, scholarly contribution to the torrent of crisis-related tomes.

There are still plenty of things Lord King won't discuss. As we peruse the pricey menu at Toca, the elegant Italian-themed dining room at the Ritz-Carlton Hotel in downtown Toronto, he strictly observes the central banker's version of omerta when it comes to the policies and pronouncements of his successor, Mark Carney, and other monetary minders. And apart from assailing the campaign tactics of both the "stay" and "leave" sides, he refuses to venture into the Brexit minefield that has caused considerable public grief for Mr. Carney.

After our server rhymes off the daily specials, Lord King jokingly asks me if this is "the kind of interview where you gain credit if you just order a couple of lettuce leaves. People think you're obviously lean and fit and healthy."

His choice of a salad of bacon-wrapped shrimp with gorgonzola cheese as a first course confirms that he's having none of that. I'm still recovering from a bit of dental surgery, so I stick to a pureed squash soup. For the main course, he opts for ravioli caprese with roasted tomatoes and pesto, a house specialty. I take a chance on a plain version of the ravioli.

Although long regarded as a euroskeptic, Lord King won't reveal which way he's leaning as the June 23 British referendum draws closer. He argues that what he and his fellow citizens need in order to make an informed choice – and haven't been getting – is a proper debate about the country's long-term future in Europe, with or without the Union. Instead, both the ins and outs are tossing around "wildly exaggerated" claims of benefits and costs. But those he singles out – such as the British Treasury's projection of £4,300 per household as the potential price of quitting the EU – tend to come from the "in" crowd.

He also thinks the euro doesn't have much of a future, but that's a separate issue. "It is a tragedy that they are just trying to keep the show on the road," he says of the monetary union. "It's becoming more and more difficult. And the scale of the problems at the end of this will be all the greater because they've kept it going for so long."


As the main courses arrive, he remarks on "the soothing quality" of Italian restaurants. "You go to a good French restaurant – first of all, the food is too rich." What's worse, "it feels like an examination and the waiter makes you feel you've failed."

Several leading players in the great financial meltdown of 2008 have penned insider accounts describing how they launched the lifeboats to rescue drowning banks and keep the world economy from sinking beneath stormy seas. As Lord King wryly observes, "they share the same invisible subtitle: 'How I saved the world.'"

Lord King leaving a meeting at 10 Downing Street in 2009. Stephen Hird/Reuters

He says he prefers to leave the full story to the historians, because anything he writes is bound to be perceived as self-serving. So readers of The End of Alchemy won't find any revelations or a personal recounting of who did what to whom. And he has not produced a memoir of his life and times growing up in modest circumstances in the West Midlands, where his father taught school.

True to his academic roots, he would much rather focus on what he perceives as the chronic ills afflicting the economics profession, where modern finance has gone dreadfully wrong and why politicians need to stop counting on monetary policy to save the world.

"This reliance on central banks as the only game in town has been dangerous, in the sense that it's increasingly ineffective," he says. "But it's also dangerous because it threatens the reputation and independence of central banks when people will say: 'Well, they failed to achieve a recovery.'"

He takes a bite of ravioli, chewing thoughtfully before explaining.

The fall in real interest rates across the industrial world "has distorted the pattern of spending and saving. So we ended up in a major disequilibrium from which we can escape only by making structural changes to our economy."

That's plainly beyond the scope of any central bank. Yet they "have thrown everything, including the kitchen sink, at the problem. Since it's not working successfully, you might think that an obvious conclusion would be: 'Well maybe the answer isn't monetary policy.'"

Lord King is optimistic that politicians will eventually summon the courage "to face up to what needs to be done. But they will run away from it for quite a long time."

The failure of centrist parties to live up to their promises has paved the way for the recent gains by extremists in Europe and the likes of a Donald Trump in the United States.

"Why is it that these politicians are doing so well?" Lord King asks. "It's too easy to dismiss some [candidates] that people just don't like. They ought to turn the question on its head: Given how unlikeable we find him, why is it that so many people want to vote for him? There must be something that he's touched, which we ought to try and be responding to."

Growing up, Lord King dreamed of becoming a cosmologist. He went to Cambridge to study math and settled on economics as a useful way to employ that skill after discovering he couldn't explore the heavens without completing three years of natural science first. Which meant doing a lot of experiments.

"And the one thing I could not do was that. I don't have the practical ability. My wife will tell you that I'm probably the least practical person she's ever met," he says. "So actually doing experiments was not something that seemed terribly sensible."

CURRICULUM VITAE

Age: 68

Place of birth: Chesham Bois, England, near London.

Education: Wolverhampton Grammar School, King’s College, Cambridge.

Family: Married since 2007 to Barbara Melander, a Finnish designer. Two stepdaughters, four grandchildren.

Guilty pleasure: Enjoying his wine cellar stocked with fine red Bordeaux.

Oldest investment: Two shares of Berkshire Hathaway acquired as a young academic.

Favourite pastimes: Reading, music and theatre.

Sports: Cricket, tennis and soccer.

Vacation: “I am looking forward to one.”

The couple have left London behind and now reside for much of the year in a converted oast house (a specialized farm building where hops were dried before being carted off to the brewery) near Canterbury in southeast England, which Lord King bought 25 years ago. They spend each fall in Manhattan where he has a teaching gig at New York University. He has also returned to the London School of Economics, his academic home before joining the central bank.

After we both pass on dessert and coffee, I ask him if he misses being at the centre of the monetary action. He says he certainly doesn't miss his rows with certain politicians or the personal attacks he endured. Some critics argued that he was slow to react to the economic damage in 2008 and not bold enough when he did. One urged that his knighthood (bestowed in 2011) be revoked for his support of austerity measures.

Lord King still winces at the memory of the anonymous leaks that made his job tougher during the darkest days of the financial debacle. "That was the most unpleasant part of the whole job, without any question," he said. "It is utterly corrosive of any attempt to work with other parts of government when that happens."

He then turns to a sports analogy, something he does regularly, to explain that it's the locker room cameraderie he misses, more than the game itself.

"I had 10 years [as governor]. That's a good innings. And at the end of it, I was very happy to hand over to someone else. I felt a bit like a prisoner let out of jail. I could wander around in my own time. No one told me where I had to go, and what time I had to be there."

Then, as if on cue, his book publicist comes to the table to tell him it's time to go.

The rose garden he's planning for his rural property will have to wait a bit longer.